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Wednesday, April 2, 2008

Personal Finance Book Reviews: The Short Attention Span Edition

The three books I'm highlighting today are written for three very different audiences. I had strong reactions to each of them--but are my reactions the same as yours would be? In addition to my own thoughts on each book, I'm including links to other opinions so you can get a better idea of whether these books would be useful to you.

Work Less, Live More: The New Way to Retire Early by Bob Clyatt
Bob Clyatt is a longtime member of Early Retirement Forums, and it shows. This book is packed with the real-life experiences of early retirees. He pays close attention to the emotional issues involved in retiring early. Another factor that sets this book apart is his emphasis on the idea that many people will continue working after early "semi-retirement," because part-time work allows them to retire earlier, to fill gaps in their finances, or simply to keep busy at something enjoyable and productive. He was a little weak on follow through, filling his chapter on part-time work with fairly straightforward career advice, but I'm glad that he encourages his readers to look beyond an "all-or-nothing" career model.

Work Less, Live More is written in a conversational tone similar to the "for Dummies" books. This would be a great first read for someone just starting to think about early retirement. He does occasionally jump to conclusions without sharing too much detail, so it's worth reading more before making too many decisions based on this book.

Other takes on Work Less, Live More:
FIRE Finance lists it as one of their top early retirement resources
John Greaney's Retire Early Home Page gives it a glowing review.


The Wealthy Barber by David Chilton
I spent two commutes of my life on this book, two commutes I will never get back. It was painful. The stilted dialogue. The stereotypes. The "good-natured" gibes at feminism. The "hilarious" secondary characters.
The actual advice was sound--mostly. Chilton (or his alter ego "Roy"), includes two major gaffes in his otherwise good plan for financial stability.

1. After warning his audience away from single stocks by explaining that most stockbrokers don't beat the market (good advice), he recommends that they buy mutual funds with "expert" managers who have good records, including paying higher fees for a good manager. What? Why? He gives no explanation for why mutual fund managers would be able to beat the market when stockbrokers can't, and treats stock mutual funds as though they are a completely different, less risky type of investment than single stocks.

2. This book consistently mentions very high rates of return on investments--11%, 15%, 20%. The reader who would get the most from this book is an absolute beginner in personal finance and might easily make the mistake of assuming these are average or likely returns--even for CDs, which Chilton recommends in a few places as "safer" without emphasizing the much lower rates of return.

Still, I will forever be indebted to The Wealthy Barber. When Roy, the friendly barber, shared his wisdom about SEP-IRAs, I had a *duh* moment and realized that I'm eligible for one of these, meaning that I can sock away up to 25% of my freelance income in addition to the $5000 I contribute annually to my regular IRA. I lurve tax-advantaged savings.

Other takes on The Wealthy Barber:
Trent at The Simple Dollar wrote several posts on this book.
J.D. at Get Rich Slowly agrees that the writing isn't all that good, but it's still one of his favorites.


How to Retire Early and Live Well
by Gillette EdmundsIn this book, a guy who started living off his investments in 1981 at age 29 tells you everything he knows about investing in very extensive detail. Sound dull? I was initially disappointed that this book was about investing rather than personal finance. But by chapter 3, it was like crack. I stayed up until 1:00 three nights in a row devouring the vast amounts of information and strategy he packed into this small book. I made an emergency trip to the library to check out other books on investments to check his reasoning. I started boring everyone I know by talking about asset allocation, correlation, and emerging markets funds.

Edmunds grabbed my interest by talking about a whole range of investment options, not just U.S. stocks and bonds, and how combining different investments in the right way can allow higher returns and also protect you against things like inflation. I guess I'd always thought that when the stock market tanked, I was doomed to low returns until it recovered. This book taught me otherwise.

It would be hard to take all of advice without having a large amount of money to invest. Nonetheless, this book is highly recommended as an unusual and readable take on investing. His step-by-step "humility portfolios" are particularly valuable.

Retire Early Home Page
gives this book five stars.
Some helpful Amazon reviews.

5 comments:

Todd said...

I love the short book summaries. I too thought that the wealthy barber was a bit of a beating, but I suppose it all depends on the level of your knowledge before you read a book like that!

Working Rachel said...

@Todd: Thanks! Yes, I think The Wealthy Barber might be quite useful to someone with not much knowledge...but that writing style!

Working Rachel said...

Of course, I'm a former English major.

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